Limited Service debate spreads to the Old Dominion

House Bill 316, Agent Services Legislation is now being considered for passage in the Virginia Generaly Assembly. Ostensibly, the bill, backed by the Virginia Association of Realtors (VAR), seeks to ensure that consumers understand what services they will or won’t receive in a brokerage relationship by creating a new form of agency "Limited Service" (LS).

Currently, Virginia agency law allows for two kinds of relationships: 1) standard agency, in which clients are owed the full gamut of statutory agency services/duties by the real estate licensee; and 2) non-agency/independent contractor, in which licensees provide only the services contracted for, with no disclosure requirement as to services not provided. But new limited services real estate brokerage models anticipate a hybrid approach: a limited kind of agency relationship, in which consumers may choose brokerage services a la carte, and in return pay the broker a flat fee or reduced commission.

Overall, I am pleased with the decision of VAR to back a simple disclosure rather than enforced enumerated service requirements which have been promulgated in various states. The disagreement I have with the proposed legislation is that it provides for Multiple Listing Services (MLSs) to create a data field to designate "LS" listings without a prohibition of not making the designation field searchable. By making LS designation searchable traditional agents are able to selectively elimlinate LS listings from their searches as well as any searches they may create for automatic email to their clients. It invites discrimination against LS firms and provides no counterbalancing positive effect that is not already available in the existing MLS data fields.

To me the LS designation in the MLS data fields is a "red herring". It is disingenous for agents to say that they "need" a separate MLS field to know that they are dealing with an LS listing since this disclosure can be readily made in the existing "agent remarks" field of the listing. From my experience, LS brokers aren’t attempting to hide the fact that the listing is LS. In fact, one of our biggest time/money wasters as an LS firm is answering calls from agents who haven’t read the MLS instructions about who to contact for showings, contracts, etc.
From the other side, I really can’t see what all the fuss is about from these agents who are supposedly having to do SO much more work with LS listings. When I was a traditional agent, I would have welcomed (read: jumped all over) the opportunity to directly negotiate my buyer clients contracts with the sellers (not allowed by precendent in my market). Not only would I have been able to more clearly and fully present the interests of my clients, I would have been making contact with another future buyer/seller prospect which is the name of the game for real estate agents.
I presume that traditional brokers see this new legislation as a win for the status quo because they think that by telling the "poor, uninformed" sellers what they’re missing by listing LS or MLS entry-only they will change their minds about attempting to look for ways to save their equity. (HA HA).
What confounds me is how the traditional real estate leaders continually consider these issues affects them without giving any though to what the consumer wants. Such a myopic and selfish outlook only serves to make the new entrant innovators look even more consumer oriented. And it’s beginning to show. Look how may flat fee, limited service brokers there are now. A quick Google search shows our numbers are increasing exponentially. Wouldn’t they think it’s a result of consumer’s being fed up with the lack of choices? Being forced to purchase a bundle of services doesn’t protect anything except the traditional Realtor’s right a full commission.
My feeling is that even in states where minimum service laws have been passed, those laws will eventually be overturned once the consumer wakes up to what’s really happening. Calling the laws "consumer protections" can’t belie the fact that choices are being eliminated. Experience shows that the consumer, and specifically consumer choice, always wins in the long run. Even Microsoft now says they’re going "open source".

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